Historically, many commodities, including fossil fuels like crude oils and refined products, have had volatile prices. Large fuel-consuming companies such as airlines or trucking companies may need to regularly purchase large amounts of fuel to operate. Therefore, these companies are particularly vulnerable to fuel price volatility of, for example, crude oils. To reduce exposure to volatile and potentially rising fuel costs, these companies engage in various fuel hedging strategies. These strategies may include trading options over-the-counter (OTC) or through an exchange.
Like large fuel-consuming companies, individual consumers of commodities including oil have also been adversely affected by volatile oil prices. Thus, individual consumers have also long sought strategies and technologies to reduce their exposure to increasing oil prices. But unlike these companies, individuals are much more limited in their fuel risk-management strategies. For example, when the market price of oil is low, the consumer may wish to purchase additional oil to hedge against future increases in oil price. But even if a consumer (or user) wishes to purchase more oil from a merchant, such as a gas station, the consumer is limited to the amount of gasoline that his automobile's fuel tank can hold. Some consumers may own spare containers to store additional oil. But these containers, too, are limited in capacity and further requires a means to store these spare containers. Additionally, stored fuel is a fire hazard and degrades over time, which further reduces value of storage.
Other consumers may try to mitigate fuel volatility by purchasing stocks or other financial instruments with performance that generally tracks the price of oil. For example, if the price of oil increases, these stocks are likely to have increased value. Thus, the consumers may use the gains from these higher-value stocks to offset the price that these consumers may need to pay for gasoline at a gas station. If the price of oil decreases, though these stocks may have lower value, consumers would pay less for gasoline as the gas station. This strategy, however, is inefficient because the values of stocks or other financial instruments do not necessarily track (or track in real time) the actual price of commodities like oil for which consumers ultimately pay. Additionally, this strategy requires the consumers to concurrently manage both their financial assets and fuel-consumption behavior. For example, the consumers may utilize a web application to manage his fuel-stock portfolio to determine when to purchase or sell his financial assets. The consumer may also need to utilize a separate application to manage how much gasoline to purchase (given his tank's limited storage) to correspond to his fuel-stock portfolio.